Essay in Barron's protests Fed's shredding its minutes
- 8:45p ET Sunday, December 16, 2001
Dear Friend of GATA and Gold:
Last week Barron's published an essay by Robert D.
Auerbach, a professor at the University of Texas,
complaining about the Federal Reserve's active
concealment of the public policies it carries out.
Interestingly, one of the Fed meetings cited by
Auerbach is the one in whose minutes GATA's
investigators discovered what we consider to be the
smoking-gun reference to "gold swaps" undertaken by
the U.S. Treasury Department, the Federal Open
Market Committee meeting of January 31, 1995.
The Fed clearly has a lot to hide, about gold and
We ask that our supporters in the United States share
this essay with their representatives in Congress as a
way of reiterating their request that the Fed and the
Treasury Department be compelled to do their business
fully in public and come clean about gold.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
That Shreddin' Fed
Just 18 minutes of Watergate tapes were erased, while
the Fed's "edits" veil years of historic record
By Robert D. Auerbach
Richard Nixon regretted not having burned the infamous
Watergate tapes. Federal Reserve Chairman Alan
Greenspan, who, shortly after Nixon's resignation, came
to Washington to be Gerald Ford's chairman of the
Council of Economic Advisers, evidently intends not to
make the same mistake.
When the Federal Open Market Committee gets together
Tuesday, certain portions of the meeting may not be
recorded. Moreover, unedited transcripts of what is
taped will be disposed of, leaving only records edited
by Fed staffers for the public to read, and then only
after a wait of five years.
That could leave a serious gap in the historical record
of the Fed's response to the national emergency after
the terrorist attacks of September 11, when U.S.
monetary authorities provided unprecedented liquidity
to prevent a meltdown of the global financial system.
In another instance when the central bank, under
Greenspan, deftly defused a crisis -- the October 1987
stock-market crash -- the records of Fed officials'
crucial telephone conference calls are conspicuously
Since early 1995, some discussions among the 12 FOMC
members, the Fed's policy-setting panel, have been
declared "off the tape." Supposedly, these unrecorded
talks don't relate to devising monetary policy. But at
the two-day meeting of January 31-February 1, 1995, the
FOMC voted to pull the plug on recording its meetings
if the discussion fell under the undefined rubric
"organizational." And Greenspan stated: "I am not going
to record these votes because ... there is no legal
requirement." The vote was taken without recording
Ironically, that vote came after Greenspan noted prior
FOMC reluctance to have its discussions recorded
"mainly on the grounds that we thought the taping
inhibited the deliberative process." But he added "...
with perhaps a qualification [a subpoena for early
release of the transcript] ... there is very little
evidence that the quality of our discussions has been
Prior to the vote, a report from an FOMC subcommittee
suggested a policy of "off-the-tape discussion that is
not about monetary policy." But Lawrence Lindsey, then
a Fed governor and now a Bush economic adviser, warned
that "one might think of it as a witch hunt in which we
are turning over to the prosecutors evidence that is
really none of their business. It is possible for us to
prevent taping under those circumstances by turning off
the tape now."
The Fed chairman was determined to turn off the
recorder for "organizational discussions" after what he
called "a frankly outrageous request for the tape of
our discussion in October a year ago," according to the
January 31-February 1, 1995, meeting transcript. Once
the motion passed, FOMC members also were told to move
some discussions to lunchtime, when "the tape is not
The "outrageous request" Greenspan referred to came
from former House Banking Committee Chairman Henry
Gonzalez, who insisted that congressional staff members
hear a recording of an October 15, 1993, FOMC
conference call. In that tape, most of the presidents
of Fed district banks and board governors agreed not to
mention the previously unknown existence of the FOMC
transcripts when they testified before the Banking
Committee about FOMC written records. Greenspan, who
was to cover this subject for the banking panel, didn't
mention the 17 years of transcripts at the hearing.
Gonzalez later accused the witnesses of misleading
A week after the hearing, Greenspan ended the Fed's 17-
year secret by informing the Banking Committee that
"unedited transcripts exist for each regular meeting of
FOMC held after the meeting of March 15-16, 1976," in a
letter to Gonzalez. Thirty-eight of the transcripts (or
tapes) for 104 FOMC conference calls were reported
The FOMC also has shredded its unedited transcripts for
1994, 1995, and 1996.
FOMC members were told in 1995 that, even though they
were "not permitted" to discard "raw transcripts" of
meetings before 1994, future unedited transcripts would
be "thrown out" and only transcripts edited by the Fed
would be retained.
The Fed hasn't yet shredded the unedited transcripts of
FOMC meetings since 1996. But there are no plans to
change the central bank's policies of turning off tape
recorders or shredding unedited transcripts, according
to Donald Kohn, adviser to the board for monetary
FOMC meeting transcripts -- with redactions for
national security, personnel matters, and some foreign
central-bank matters -- were published in paraphrased
form during 1965-1976, and verbatim from 1993 to
currently, with approximately a five-year delay. The
unedited transcripts are sent to the National Archives
and Records Administration, where they are edited by
archivists and published after a 30-year delay.
The late Arthur Burns, the Fed chairman in 1970-78,
left his term's FOMC transcripts at the Ford Library in
Ann Arbor, Mich. After being lightly edited by the
archivists, they are now available for public viewing.
Yet the Fed has not yet released these same transcripts
for the last years of Burns' term.
The Fed has applied a heavy hand to redacting. The
records of periods of crisis are conspicuously sparse.
For instance, there are abundant redactions in the 1995
transcripts when the FOMC members voted to lend money
to Mexico because the U.S. Treasury had insufficient
funds and the Congress would not approve this foreign
And, as noted, tapes and transcripts of the panel's
conference calls of October 21, 22, 23, 26, 27, 28, 29,
and 30 of 1987 are missing. Conspiracy theorists at the
time believed that stock-index futures were bought by
the Fed's trading desk, or by brokerage firms at the
central bank's behest, to pull the equity market out of
its nosedive. With the peculiar absence of the records,
these stories take on the quality of accounts of UFO
landings in Roswell, New Mexico, which supposedly were
covered up by the government.
In truth, our present national emergency dwarfs that of
the post-October 19, 1987, period. The Fed avoided a
meltdown following the September 11 attacks by taking
extraordinary and decisive actions. On September 13
alone it lent $45 billion through its discount window.
It used open-market operations to massively increase
liquidity: by $38 billion on September 12, $70 billion
on September 13, and $81 billion on September 14.
The Fed also implemented $90 billion in swaps with
central banks, and granted billions of dollars of
credit to banks on its outmoded interdistrict paper
check-clearing system because its contracted 53-
airplane fleet was grounded. (Slower surface transport
was substituted until all air travel resumed a week
after the attack.)
That said, there should be an FOMC transcript of
deliberations after September 11, clearly showing each
FOMC member's part in distributing these billions of
dollars as well as any funds lent to brokerages and
other businesses post-September 11 under the Fed's
emergency powers (Section 13-3 of the Federal Reserve
Act) with a vote of five members of the Board of
That presumes that these crucial discussions were
indeed recorded. According to one Fed official, he is
aware of only one instance in which talks were off-
tape. "No recorder [was] functioning" for part of the
May 23, 1995, FOMC meeting. The minutes of this meeting
state that a portion "was not recorded in keeping with
the decision made at the meeting on January 31-February
1, 1995, normally not to record discussions unrelated
to monetary policy."
The 1995 transcripts published this year, however, show
FOMC members granted themselves authority to pull the
plug without agreeing on the meaning of "unrelated to
Does that mean discussion that relates narrowly to the
rate at which the overnight federal funds rate is
pegged, or more broadly, the policies undertaken to
The Fed's present policies of shredding unedited
transcripts of its FOMC meetings or allowing
deliberations to occur "off the tape" leave these and
other questions unanswered. Most importantly, they are
inconsistent with making each FOMC member accountable
in managing the billions of dollars involved in the
nation's domestic and international monetary policies.
Robert D. Auerbach is a professor at the Lyndon B.
Johnson School of Public Affairs at the University of
Texas at Austin, and was an economist for the House
Banking Committee for 11 years.